Banking and Finance Law Daily OCC allows bank to streamline SARs for potential structuring activity
Wednesday, November 6, 2019

OCC allows bank to streamline SARs for potential structuring activity

By J. Preston Carter, J.D., LL.M.

Under the bank’s proposal, it would no longer conduct manual investigations or reviews into the subset of alerts associated with the automated process for reporting potential structuring activity.

An Interpretive Letter issued by the Office of the Comptroller of the Currency concluded that a bank’s proposal to streamline the filing of suspicious activity reports by automating the process for identifying and reporting potential structuring activity (Structuring SARs) was consistent with the OCC’s SAR regulation (12 CFR 21.11(c)). The OCC’s conclusion, in Interpretive Letter #1166, is based on the bank’s representation that filed SARs will contain all required elements outlined in the SAR Form instructions and applicable Financial Crimes Enforcement Network guidance.

The OCC also concluded that its SAR and Bank Secrecy Act/Anti-Money Laundering Compliance Program regulations (12 CFR 21.21) permit the bank to file a Structuring SAR based solely on an alert under the conditions and limitations described in the request letter, and subject to certain limitations described in the OCC’s Interpretive Letter.

The bank proposed to streamline the filing of certain Structuring SARs by instituting an automated process that: identifies potential structuring transactions involving the accounts and transactions of U.S. consumer customers based upon alerts generated by a set of pre-determined and limited structuring scenarios; and populates SAR forms and narrative fields using available customer and transaction information. The SAR narrative fields will be automatically generated using computer software and will contain all relevant information and data points currently included in the bank’s Structuring SARs, according to the bank. SARs filed pursuant to this process will generally be filed within 30 days of the date of the alert. The bank proposes to use this streamlined reporting only when an alert relates solely to potential structuring activity, which is defined by reference to FinCEN regulations and to the SAR form.

As proposed, the bank would no longer conduct manual investigations or reviews into the subset of alerts associated with the automated process. To ensure that a manual review is performed in appropriate cases, the bank will remove certain alerts from the automated process and subject them to a normal investigation, based on specified criteria. The bank’s proposal outlines several risk-based criteria that are intended to ensure that transactions requiring more involved review will be subject to appropriate manual reviews, which are commensurate with the risks of the U.S. consumer accounts subject to the automated process.

The OCC said it is open to engaging in regular discussions between the bank and appropriate OCC personnel, including providing proactive and timely feedback relating to this automation proposal, but declines to offer the regulatory forbearance that was requested. The bank requested regulatory relief to conduct this initiative within a "regulatory sandbox." The Interpretive Letter stated that, while the OCC encourages responsible innovation within the federal banking system, it will not approve a regulatory sandbox that includes forbearance on regulatory issues for the bank’s initiative for the automation of Structuring SAR filings.

The OCC also stated that, "this determination does not mean that the OCC has concluded that every Structuring SAR filed under this automated process will be consistent with the regulatory requirements and applicable FinCEN guidance."

MainStory: TopStory BankSecrecyAct FinTech

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